FCC caps Comcast's growth

In the face of criticism from members of his own Republican Party and regulatory experts, Federal Communications Commission Chairman Kevin Martin secured a limit on Comcast Corp.'s growth yesterday in a 3-2 vote.

The new regulation will limit Comcast to 30 percent of the pay-TV market in the United States, halting the billion-dollar acquisitions that have made it the largest cable company in the nation and one of the largest companies in Pennsylvania.

Supporters say the new regulation will help independent programmers and could lead to smaller rate increases for consumers.

Tim Winter, president of Parents Television Council, an advocacy group that has criticized the cable industry for forcing consumers to buy channels they do not want or find offensive, said the new regulation was "pushback on an industry that is running amok."

Comcast said after the FCC vote that the 30 percent limit was perverse and that it had been previously overturned in the courts.

"The record simply does not support the divided commission vote to impose the same ownership cap that the D.C. Circuit ruled unconstitutional over six years ago when there was a lot less competition in the video marketplace," Comcast executive vice president David Cohen said in a statement.

The new regulation will undoubtedly result in litigation as both Comcast and supporters of the 30 percent limit expect to end up in court over it.

In another closely watched vote yesterday, the FCC lifted a 32-year-old ban on one company's owning a newspaper and television or radio station in the same city.

With the controversial new rules, a newspaper could own one television or radio station in the nation's 20 largest media markets.

Martin won support from fellow FCC Republican Commissioners Deborah Taylor Tate and Robert M. McDowell for the new ownership rules.

Critics contend the new rules could lead to more media consolidation and fewer independent voices. Some lawmakers opposed the new ownership rules, but Martin had the support of the White House.

In a hallmark of his leadership, Martin formed an alliance with Democratic FCC Commissioners Michael Copps and Jonathan Adelstein for the vote on the 30 percent limit on pay-TV subscribers.

The regulation has the realistic effect of clamping down on Comcast, which has 27 percent of the pay-TV market and is almost twice the size of the industry's No. 2 cable firm, Time Warner Cable Inc.

Cable-industry officials, their frustration mounting over the last two months, say Martin has made it a personal mission to force changes on the industry.

A former Bush presidential campaign worker in Texas, Martin joined the FCC in 2001 and was elevated to chairman in 2005. His signature issue has been "a la carte" programming, or getting the cable industry to sell individual channels rather than bundled channels. He is supported politically by organizations such as the Parents Television Council, a Los Angeles-based family-values group with 1.2 million members.

The group does not want consumers to be forced to pay for MTV, the FX Network, or other channels that it considers indecent, Winter said. The channels are part of bundles, or packages, sold by cable providers to consumers. Satellite and phone companies that sell video services also bundle channels.

Winter said the 30 percent limit was "trying to treat a much bigger disease with a Band-Aid. We don't think it goes to the heart of the issue," which is getting the industry to adopt a pay-per-channel model.

Cable company executives contend that the pay-per-channel model would lead to higher consumer cable bills and fewer channels. To address indecency issues, the industry has developed technology to allow parents to block access to channels they find offensive. The moves have not satisfied Martin, industry experts say.

Reflecting political winds in Washington, Martin's family-values agenda at the FCC has encountered blowback from small-government Republicans and economists.

McDowell, the Republican FCC commissioner, said in a statement that the 30 percent limit was "bad public policy" and "goes out of its way to remain ignorant of current market conditions."

Robert Crandall, senior fellow in economic studies at the Brookings Institution, said the subscriber limit "certainly makes no sense." Because of new competition, Comcast is losing power in the programming market, he said.

The limit is "one of an ever-lengthening series of anti-cable actions by Chairman Martin. . . . It's very odd and disturbing," said James Gattuso, senior fellow in regulatory policy at the Heritage Foundation, a free-market think tank.

Martin also has proposed forcing cable companies to carry more channels from individual broadcasters. In a November FCC meeting, Martin asked for the federal agency to approve a video-competition report that would have opened the door to broad new regulatory powers. The vote was delayed.

"He's using political capital that should have been used for regulatory reform and using it instead for regulatory expansion," Gattuso said.